Senator the Hon. Mathias Cormann
Minister for Finance
Special Minister of State
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 16 August 2019
KIERAN GILBERT: Let’s return now to the turbulence on global markets, which have prompted fears among many observers and analysts that we could be heading for a global recession. Let’s go live now to Perth. Joining me is the Finance Minister, Mathias Cormann. Is a global recession a possibility right now given the turbulence we have seen in recent days?
MATHIAS CORMANN: The global economy continues to grow above three per cent. US growth continues to track above trend. Our economy continues to grow. Our economy is forecast to continue to grow. All of the advice in front of us shows that our economy is expected to continue to grow. There are global economic headwinds. There are downside risks in the global economy, including the escalating trade tensions between the US and China. There are a whole series of downside risks which we would like to see resolved sooner rather than later. In the meantime, here in Australia, we are doing everything we can to ensure that we are in the best possible position to take advantage of opportunities, but also to ensure we are resilient in the face of global economic headwinds coming our way.
KIERAN GILBERT: The biggest headwind as a trading nation remains the trade war. Some interesting developments on that front, I guess prompting some bounce back on Wall Street, where Donald Trump said that he thinks the trade war will be quote, fairly short, is what he said.
MATHIAS CORMANN: We have been pleased to see that there has been some movement. There has been a level of interaction between President Trump and President Xi Jinping at a number of G20 leaders’ summits now towards the end of 2018 in Buenos Aires and a few weeks ago in Osaka. We would like to see this come to a resolution sooner rather than later. It is in everybody’s interests. It is in the interest of the US and China, it is in the interest of countries around the world including and in particular, Australia.
KIERAN GILBERT: In terms of our markets, we have copped it this week. Yesterday was the worst day since 2018 in terms of trading. What is your message to investors?
MATHIAS CORMANN: We should never overreact to daily movements on the stock market. I am not a commentator on financial markets. What I would say is that the fundamentals in the economy are strong. If you look at the employment data which was released yesterday, 41,000 new jobs created in the economy in July. More than 1.4 million new jobs since we came to Government in September 2013. The highest participation rate on record at 66.1 per cent. The highest number of Australians in jobs, more than 12.9 million. The female participation rate at an equal highest on record. If you look at the employment growth rate of 2.6 per cent, well above trend of 1.8 per cent. If you look at all of the fundamentals, yes we have to be very mindful of managing the risks that we are facing appropriately and we continue to do that. But we should also be careful not to overreact to a movement on the stock exchange at a particular point in time.
KIERAN GILBERT: On that trade issue that we have mentioned, the President has delayed the $300 billion worth of the next round of tariffs that were going to hit consumer goods, things like phones and so on until December. That has prompted hope that there might be a deal within that window. That would provide a great deal of relief in terms of, not just investors, but nations other than the two protagonists.
MATHIAS CORMANN: Australia is an open trading economy. We are a globally focused, open trading economy. We have an interest in a well-functioning, rules based, global trading system. We accept and agree that there are issues to be resolved. That there are some urgent reforms required in terms of our international rules based trading system. But we do believe that we ought to fix the system rather than operating outside the system. We would like to see the necessary reforms progressed and for the US and China to get to a resolution of their issues in an agreed fashion and within the framework of our trading system.
KIERAN GILBERT: When you look at our economy, some encouraging numbers this week on employment and elsewhere. But Infrastructure Australia this week released a report saying that there needs to be $600 billion in further investment over the next fifteen years just to keep up in terms of population growth. Is that a fair assessment?
MATHIAS CORMANN: That audit is a very important input into our policy considerations. It is a very important discipline. The underpinning modelling does not include the additional investment that we have put forward in our most recent Budget, when we boosted our infrastructure investment pipeline to $100 billion over the next decade. Some of our infrastructure at a federal level is designed to leverage additional investment from the states and territories and also from the private sector, where that is appropriate. We will continue to work our way through a prioritised list of economy-enhancing, productivity-enhancing infrastructure investments and with a focus on congestion busting in our cities. For example in the last Budget, we delivered about 160 odd urban congestion busting projects to the value of about $3 billion. The work is continuing. We are always looking for opportunities to do more. If that can sensibly be accommodated in the Budget we will always do that.
KIERAN GILBERT: That’s an interesting point that you’re always looking to do more in the context of what Governor Lowe has pointed out. Are these record low rates, now is the time to borrow more for governments isn’t it?
MATHIAS CORMANN: We certainly are committed to get our Budget back into surplus this year. This is the year when the Budget gets back to surplus after more than a decade in deficit. We do need to pay down our debt. But by the same token, we are investing record amounts in infrastructure. As I say, about a $100 billion over the next decade. But we will continue to assess where the opportunities are. If there are more things that can be done and can be sensibly accommodated within our Budget, then we will always seek to do so.
KIERAN GILBERT: Infrastructure is one element where it can boost productivity in terms of cities and easing that congestion. Another one is industrial relations. The Fair Work Commission President Ian Ross in a speech has said that, we’re basically complaining that both sides of the debate on IR leave us with a binary policy exchange characterised slogans, factually inaccurate statements and an absence of any evidence-based policy proposals. Do you feel that the Christian Porter review will help break through some of that help achieve some consensus, because right now it’s hard to disagree with Justice Ross?
MATHIAS CORMANN: The way to achieve consensus is by having the debate. I think it is fantastic to see that all of the relevant stakeholders are out there expressing their views, making their arguments and that the Australian people have the opportunity to assess what is being said and come to a more informed view. From the Government’s point of view, we are interested in pursuing reforms that will boost productivity, that will help create more jobs, that will help boost wages growth and ultimately, help us strengthen the economy. We are going into this with an open mind but very much with a commitment to consider the evidence and ultimately to make judgements based on what will help create more jobs, boost wages and strengthen our economy on the back of stronger productivity.
KIERAN GILBERT: What’s your sense on the BCA position on what’s known as the better off overall test? The BCA President Jennifer Westacott has said, the Chief Executive I should say of BCA, she believes that hampers productivity. Do you agree with her?
MATHIAS CORMANN: As Christian Porter said as the Minister responsible, it is one of the options that should be considered as part of a sober assessment where we consider the evidence. This is not a matter of making ad hoc, quick judgements now. We are going through a process. There is a review. All of the relevant stakeholders are participating in the discussion. At the end of it, we will make some informed judgements. I do not think that it would be useful to now jump to the end of that process, from the Government’s point of view, before all of these proper and sober assessments have taken place and the debate has fully played out.
KIERAN GILBERT: And finally before I let you go, we’ve seen the Pacific forum. The Government drawing a red line basically on the issue of coal that you weren’t going to commit to ending that any time soon. For our viewers, can you give us a sense of just how important that remains as an industry and how long do you think it will remain thus?
MATHIAS CORMANN: Sorry, I could not really here this.
KIERAN GILBERT: In terms of coal, in terms of its importance to our economy. Does it remain a pivotal part of our economic makeup or is it, as others argue, a diminishing part given a surge in renewable investment?
MATHIAS CORMANN: Firstly, coal is an important energy source for Australia and will continue to be so over the long term. Coal is an incredibly important export earner for Australia. Of course coal will continue to be an important part of the Australian economy. But let me also say that Australia is absolutely committed to effective action on climate change. We are on track to meet and exceed our Kyoto emissions reduction target. We have a plan to meet out 2030 emissions reduction target agreed to in Paris. We are working with our Pacific neighbours in relation to investment and increased investment into renewable energy and into projects to boost their climate resilience. Australia is very much doing its bit, stepping up, taking responsibility. But we are also of course making judgements on what is sensible. We are focused on doing the right thing by the environment in a way that is economically responsible.
KIERAN GILBERT: Doing our bit, but that’s not necessarily the view of some of the smaller Pacific nations.
MATHIAS CORMANN: At the Pacific Island Forum a communique was finalised, which I understand was agreed by all present.
KIERAN GILBERT: Minister, thanks for your time. We’ll see you next week.
MATHIAS CORMANN: Always good to talk to you.